SPAC resurgence reignites focus on D&O coverage

After a subdued period, special purpose acquisition companies (SPACs) are staging a comeback in 2025, reigniting demand for directors’ and officers’ (D&O) cover. Aon warns the rebound is intensifying litigation risk, challenging insurers and reinsurers – notably in Bermuda’s specialty market – to deliver tailored, innovative solutions.

In a recent article authored by Aon’s financial services group leaders Conor Cassin, senior VP, Adam Furmansky, D&O product leader - East, and Nick Reider, D&O product leader - West, the renewed SPAC boom was exposed alongside litigation uncertainties that continue to define it, and the implications for the D&O insurance market.

Furmansky said: “SPACs are generally viewed as an easier and cheaper way for a company to go public, but they’re not simply a shortcut to public capital.” That cautionary note captures the reality of 2025’s surprising SPAC revival.

After nearly two years of dormancy, the first eight months of 2025 saw 81 SPAC IPO filings in the US, raising $16.1 billion, a dramatic rebound from just $1.8 billion in 2024. This year, SPACs have accounted for about 60% of IPO volume and 40% of proceeds, underscoring their renewed significance, Aon reported.

Yet litigation remains the sector’s persistent shadow. Aon highlighted that by late 2023, more than 20 SPAC-backed firms had filed for bankruptcy, erasing $46 billion in equity value. Today, most disputes arise not from the IPO itself but from deSPAC transactions and post-deSPAC performance, leading to shareholder claims and costly defence battles. Settlements often stretch into the tens of millions.

The SEC’s 2024 rule changes were designed to improve disclosure and governance, but they remain largely untested. Reider noted: “There is some uncertainty around how the rules will be applied. That is in addition to the uncertainty we have seen in SPAC-related D&O litigation, where, in some instances, carriers paid limits they didn’t expect to pay.”

For insurers, particularly in Bermuda, the challenge is structuring coverage that responds to this complexity. Traditional IPO D&O approaches may fall short given the multiple parties involved — SPAC sponsors, targets and post-deSPAC entities. Innovative solutions are emerging, including “SPACkage” policies that bundle pre- and post-transaction coverage, and straddle coverage to ensure claims spanning both periods are not excluded.

Aon highlighted that private equity portfolio companies are also in focus. For firms considering SPAC exits, careful tailoring of exclusionary language and early integration of risk transfer strategies are essential to preserving deal value.

For Bermuda’s D&O and reinsurance markets, the SPAC resurgence represents both opportunity and a test. With litigation risk rising alongside transaction volume, the island’s expertise in complex, layered coverage could once again prove central to global SPAC dealmaking.

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